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Regional perspectives; state estimates of wages and salaries: a methodological update.

REGIONAL PERSPECTIVES

State Estimates of Wages and Salaries: A Methodological Update

THE estimates of State personal income in "State Personal Income, Summary Estimates for Second Quarter 1989" have been revised from the first quarter of 1986 through the first quarter of 1989. The revisions reflect the incorporation of the annual State personal income estimates released in August 1989 and new seasonal factors for the quarterly source data.

Quarterly changes in the wage and salary component of the State estimates differ from those in the wage and salary component published by BEA in the national income and product accounts (NIPA's). This article describes the source data available to estimate wages and salaries, describes the methodology used for the State and national estimates, and traces the differences in the two estimates to problems in dealing with lump-sum bonus payments in two industries.

Source data

Two major sets of source data, both collected by the Bureau of Labor Statistics (BLS), are available for wages and salaries.(1) They differ with respect to coverage, periodicity, level of industrial and geographic detail, and timeliness in several ways that are relevant to this discussion.

ES-202 data.--Quarterly data on wages and salaries are available from State employment security agencies' tabulations that summarize employers' reports of their unemployment insurance contributions, the ES-202 reports. These quarterly reports are required of all employers covered by State unemployment insurance laws and by the unemployment compensation program for Federal employees, providing a virtual census of nonagricultural employees and their wages. The data are at the four-digit Standard Industrial Classification (SIC) level of industry detail, are available by State and county, and are released 6 months after the close of the reference quarter. The reported wages and salaries include bonus payments, but they are not identifiable as such.

790 data.--Monthly data on employment, average weekly hours, and average hourly earnings are available from a survey, for which Form BLS 790 is the data collection schedule, conducted in cooperation with the State employment security agencies. Data are collected each month from a sample, benchmarked once a year to the ES-202 employment data, of over 250,000 nonagricultural establishments. The data are for the pay period that includes the 12th of the month. National totals of employment, hours, and earnings are at the two-digit SIC level. For the States, employment data, but not hours and earnings data, are available, and they are at the one-digit SIC level; employment data and, for production workers, hours and earnings data are also available for durable and nondurable manufacturing. The national data are released in the week after the close of the reference month, and the State data are released a week later. The average hourly earnings exclude several labor costs, notably bonus payments.

Methodology

National estimates.--BEA's annual estimates for most private wages and salaries in the NIPA's are from the ES-202 data. Monthly and quarterly estimates are interpolations and extrapolations of the annual ES-202-based estimates, by two-digit industry, using as the indicator the product of employment, earnings, and hours derived from the 790 data. BEA makes adjustments based on supplementary information--for example, for a strike that did not occur during the pay period for which data were collected. Adjustments are made for bonus payments only when they are unusual in magnitude or timing.

Monthly estimates of wages and salaries are released, as part of the personal income and outlays release, in the first month after the close of the reference month. The monthly estimates are used to calculate quarterly estimates, which are part of the NIPA release in the first month after the close of the reference quarter and are subsequently revised 1 and 2 months later. After the second revision, quarterly estimates of wages and salaries--like all other quarterly NIPA estimates--are not revised until the following July. The ES-202 data for a quarter are not yet available by the second revision. In July, the annual estimate is tied to the ES-202 data, and the quarterly (and monthly) estimates are interpolations using the 790 data as the indicator.

State estimates.--BEA's annual State estimates for most private wages and salaries, like the national estimates, are from the ES-202 data. The State estimates for quarters except the most current are interpolations and extrapolations of the annual estimates; the State quarterly ES-202 wages are used as the indicator, and the estimates are controlled, except as will be explained in the next section, to the quarterly changes in the national wage and salary estimates. The most current quarterly estimates are extrapolations using the 790 State employment data at the one-digit SIC level and, for manufacturing, the product of employment, hours, and earnings in durable and nondurable manufacturing. These estimates, to the same extent as for other quarters, are controlled to the quarterly changes in the national estimates.

The quarterly State estimates of wages and salaries are released 4 months after the end of the quarter. Revised estimates of that quarter, which incorporate the then available ES-202 data, are released 7 months after the close of the quarter. The incorporation of the ES-202 data in the second estimate is viewed as a move to substantially better data for the State estimates. The ES-202-based estimate replaces an estimate derived from a combination of State 790 employment data and national 790 wage data, where the wage data are the product of hours and a measure of earnings that does not include bonus payments.

Bonus payments

In the last several years, lump-sum bonus payments in the services and the finance, insurance, and real estate industries have been unusual both in size and timing, and these payments have significantly affected the quarterly pattern of the ES-202 wage and salary data. As noted earlier, the ES-202 data include the bonus payments in the quarter they are paid, but bonus payments are not identifiable as such. Differences in the extent to which the ES-202 data are used as extrapolators and interpolators have caused differences in the quarterly changes in BEA's national and State estimates, as shown in table 1. (The annual estimates of wages and salaries differ in level by relatively small amounts that reflect differences in coverage and in the timing of revisions.)

In the services industry, the size and timing of bonus payments by personal service corporations to their owner-employees (doctors, lawyers, etc.) have been unusual since the fourth quarter of 1987, reflecting provisions of the Tax Reform Act of 1986 and the Revenue Act of 1987. For the national wage and salary estimates, the fourth quarter 1987 estimate was adjusted to include an extra payment; the quarters of 1988 and 1989 were not adjusted because it was assumed that bonus payments in those years had returned to a normal size and pattern. However, recent analysis of the ES-202 data suggests that the size and pattern since the fourth quarter of 1987 continue to be unusual. Therefore, for the services industry in the State estimates, the U.S. total was derived independently from--that is, not controlled to--the national estimates to avoid overriding the additional information, including information about the State distribution, in the ES-202 data. The U.S. total for the services industry in the State estimates was derived as the sum of seasonally adjusted State ES-202 data. However, the procedures that BEA used to seasonally adjust the State ES-202 data cannot deal well with situations of unusual size and timing. These data will be reexamined to determine if the payments in 1988 and 1989 reflect a return to a permanent pattern and, if not, if a better seasonal adjustment can be developed. Consequently, the State estimates may be subject to further revision as more information becomes available.

In the finance, insurance, and real estate industry, the ES-202 data for the first quarter of 1989 indicate a sharp decline in bonus payments to security and commodity brokers. This information was not available by the time of the second revision of wages and salaries in the NIPA's, but it is reflected in the State estimates because the State estimates for wages and salaries in finance, insurance, and real estate were not controlled to the national estimate. The national estimate will be revised to reflect the ES-202 data when data for the full year are incorporated. [Tabular Data Omitted]

(1)Information from a variety of other sources--for example, the Department of Agriculture for farm workers and the Department of Defense for military personnel--are also used. These sources account for about 6 percent of wages and salaries.
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Publication:Survey of Current Business
Date:Oct 1, 1989
Words:1411
Previous Article:Receipts and expenditures of state governments and of local governments: revised and updated estimates, 1985-88.
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